MSCI Launches Tool Helping Investors Achieve Standard ESG Exposure

As a way to better help the investment community standardize the environmental, social, and governance strategies, MSCI Inc. launched a tool to help investors assess exposure and their alignment to the United Nations Sustainable Development Goals.

The MSCI SDG Alignment Tool provides a complete view of a company’s net contribution – both positive and negative – towards addressing each of the 17 UN SDGs, according to a press release. The tool brings includes MSCI’s framework covering over 8,600 equity and fixed income issuers, with analysis of the full range of a company’s operations, products, services, policies, and practices, to evaluate net contribution to addressing the global challenges the UN SDGs try to address.

“Five years on from the adoption of the UN SDGs, we are at a critical juncture. There is increasing demand from investors to channel capital to help deliver on these goals, but the fragmented data around the extent to which a company’s products and operations are aligned to a particular SDG remains an obstacle. Through this new tool, we are seeking to provide an additional layer of transparency for investors to better assess the merits of claims put forth by their portfolio companies. With the target deadline for achieving the SDGs only a decade away, the standardization of that assessment is critical,” Remy Briand, Head of ESG at MSCI, said in the note.

Global investors are taking a greater interest in ESG-related investment strategies, but observers have warned that the industry lacks a unified standard for categorizing or ranking ESG criteria. Critics have even warned that some “ESG” strategies are only adopting the ESG appellation without clearly defining the selection process and the potential for abuse from companies that self-report their ESG characteristics.

The framework behind the MSCI SDG Alignment tool takes from publicly available information, instead of solely relying on companies self-declared alignment with the goals, to provide a holistic view of alignment.

“We have found that companies can both overstate and understate their commitments to particular SDGs, which could undermine efforts by institutional investors to advance sustainable development. Investors pursuing an impact investing approach could find that portfolio companies claim to support an SDG while being implicated in conduct that may belie that support. Conversely, some companies that fail to publicly commit to any SDG but may align with at least one of the goals may fall below the radar of impact investors seeking to target positive impact companies,” Brand added.

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